Chinese Banks Hope to Sell USD$29 Billion in Bonds in September to Shore up Capital Standing

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Banks in China plan to issue near near-record amounts of bonds in September to replenish their capital levels, in the wake of a first half profit plunge due to the impacts of the COVID-19 pandemic.

Sources said to Bloomberg that four Chinese banks, including the world’s biggest bank in terms of assets ICBC, will sell a total of 195 billion yuan (approx. USD$28.5 billion) in either perpetual or tier-2 capital bonds this month, for China’s highest monthly sales on record.

ICBC plans to issue 60 billion yuan in tier-2 bonds in September, while China Guangfa Bank is scheduled to issue 45 billion yuan of the instruments.

Bank of Communications has scheduled 30 billion yuan in perpetual bond sales, and Postal Savings Bank of China will sell 60 million yuan.

The moves arrive following a precipitous decline in profits for Chinese banks amidst efforts to combat the COVID-19 pandemic. In the first half of 2020 Chinese com­mer­cial banks posted net prof­its of one tril­lion yuan, for a YoY de­cline of 9.4%, ac­cord­ing to data from the China Bank­ing and In­sur­ance Reg­u­la­tory Com­mis­sion (CBIRC). 

In June Pre­mier Li Ke­qiang called for Chi­nese banks to “sac­ri­fice” 1.5 tril­lion yuan in prof­its in 2020, in or­der to im­prove fi­nan­cial in­clu­sion and keep Chi­na’s econ­omy on an even keel in the wake of the Novel Coronavirus.

A report released by S&P in August indicates that four of China’s big state-owned banks – In­dus­trial and Com­mer­cial Bank of China (ICBC), Bank of China (BOC), China Con­struc­tion Bank (CCB) and Agri­cul­tural Bank of China) had a com­bined cap­i­tal short­age of 2.25 tril­lion yuan (ap­prox. $327.16 bil­lion) in 2019.

S&P sees this fig­ure ris­ing to as high as 6.51 tril­lion yuan by 2024 due to the ad­verse eco­nomic im­pacts of the COVID-19 pan­demic. 

Related stories

China Big Four State-owned Banks Headed for 6.51 Tril­lion Cap­i­tal Short­fall by 2024: S&P Global Rat­ings

Eight Chi­nese Banks Is­sue Nearly 150 Bil­lion Yuan in Per­pet­ual Bonds Since Start of 2020

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